“the market has a message for those who are listening”
Welcome to “Message from the Market”. The forum for my thoughts gained from more than 30 years’ experience in the Investment Markets (20+ years as a Chartered Financial Analyst – CFA).
I have carefully studied daily moves in the Dow Jones Industrial Average and S&P 500 going back as far as I could access the data. From the late 1800’s for the Dow Jones and the mid 1920’s for the S&P.
What have I learned?
Markets go up much more of the time than they go down, it pays off to be invested in the stock market!
But…markets also have periodic declines that can erase more than 40% of a portfolios value. There have been 12 of these bear markets (periodic declines) in the last 118 years, the worst being the period between 1929-1932 when the market declined almost 90%!
These cyclical patterns are driven by the economic cycle and collective human behavior in response to an abundance of news and information. While not always obvious, the Markets message can still be deciphered and understood.
Yes, it is impossible to predict market direction with absolute certainty but both economic trends and market patterns can be analyzed and used to predict which direction is “more likely than not”, particularly when looking at longer time frames.
We use an investment approach at Aventine Financial to position client portfolios in a way that will capture most of a market uptrend while guarding it from the extended market declines as experienced in 2000-2003 and 2008-2009.
While we are not able to identify major market turns (up or down) with perfect precision, our proprietary Technical and Fundamental market indicators allow us to adjust your portfolio asset allocation. Research supports that asset allocation is the primary driver of long-term investment returns and limiting portfolio volatility.
At Aventine we firmly believe that properly adjusting your asset allocation during the major market declines provides two key client benefits:
- It helps you “sleep better” during the worst of the decline knowing that your investment portfolio or nest egg is positioned more conservatively.
- It protects your investment gains generated during market uptrends which should improve long-term performance due to the Mathematics Of Losses which I will address in a future post.
It is this Investment Philosophy that is central to the risk management process we use at Aventine Financial Group. While market indicators are critical to our disciplined investment process, there is still an element of professional judgement involved and why our process is not for the “do it yourself” investor.
I will use this forum to give you, the reader, insight into some of the factors we consider when making investment decisions. However, the best way to benefit from our knowledge and experience is to join our family at Aventine Financial.
All the best! – Chris
Christopher Wills CPA, CFA, CFP